Farmland Series III: Fuel for the Global Population Boom

Sprott’s Thoughts

By Albert Lu

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According to the United Nations Department of Economic and Social Affairs, world population increased by over 12 percent from 6.71 billion to 7.55 billion during the last 10 years. The same group projects the number to exceed 11.1 billion by the year 2100.[1]

What impact might this trend have on global resources, in particular food?

In a recent panel discussion with Ceres Partners executives, Rick Rule of Sprott U.S. Holdings Inc. remarked that living standard improvements among the lower economic classes tend to place the largest strain on physical resources. Rule explained, “Increases in income in the lowest part of the demographic … generate the greatest demand for resources. When people like us get more money, we don’t buy stuff, we buy services – maybe some little product made by Apple that doesn’t consume any commodity at all ….”

According to Rule, a 30-year agricultural investor, the demographic thesis is powerful. “One inescapable trend in history is that people beget people. In other words, populations [grow] … What we’ve seen over thousands of years is the ascent of man,” he said.

Perry Vieth, President of Ceres Partners, also noted, “As people get a little more wealthy, they want to provide better food for their families. That usually includes adding more protein in the diet.” Vieth added that “China consumes over 50 percent of the world’s pork population.”

These observations and the fact that most of the projected population growth is expected to come from the world’s less developed regions point to a potential opportunity in agricultural investments.[2]

Who will feed this emerging middle class?

Vieth makes a strong argument for U.S. farmers, particularly those situated in water-rich regions. Better food requires larger grain stocks. According to Vieth, one pound of pork requires roughly five pounds of grain to produce. For beef, the ratio is one-to-seven. But can farmers grow these grains closer to their target markets — China for example? Apparently, it’s not that simple; it takes water to make that grain.

As Vieth explained, growing corn requires approximately one inch of rain per week. Over a 12-week growing season, that amounts to 12 inches of rain.

“When we export grain, we are exporting water … We’re sending 12 inches of rain … just in a different form, corn.”

Will water be the fuel that drives the global population boom?

View Rick’s interview here

1] “World Population Prospects – Population Division – United Nations”. esa.un.org. Retrieved 2017-10-10.

[2] Ibid.